March 2013 Arlington, Virginia

Hosted by Howard University

Division of Institution & Award Support Cost Analysis & Audit Resolution Branch

Robyn Daniels, Grant, Contract & Cost Analyst for Award Monitoring and Business Assistance

NSF POST AWARD MONITORING & COMPLIANCE

NSF REGIONAL GRANTS CONFERENCE

1

The Cost Analysis and Audit Resolution (CAAR) Branch is situated within the Office of Budget, Finance & Award Management (BFA)

Chief Financial Officer & Director, Office Of Budget, Finance & Award Management

Large Facilities Office

Budget Division (BFA/BD)

Division of Acquisition & Cooperative Support

(BFA/DACS)

Division of Financial Management (BFA/DFM)

Division of Grants & Agreements (BFA/DGA)

Division of Institution & Award Support

(BFA/DIAS)

Budget Operation &

Systems Branch

Program Analysis Branch

Contracts Branch

Cooperative Support Branch

Accounting Operations

Branch

Cash Management

Branch

Financial Systems Branch

EHR/BIO Branch

MPS/GEO/SBE/OIA Branch

ENG/CISE/OCI/ OPP/OISE Branch

Policy Office

Systems Office

Cost Analysis & Audit Resolution

Branch

2

Discussion Points

Overview of NSF’s Award Portfolio and Risk-Based Monitoring Strategy

Highlights of NSF’s Annual Risk Assessment Process and Key Monitoring Approaches

Description of Selected Advanced Monitoring Activities – Desk Reviews, Site Visits, and Virtual Visits

Discussion of Some Common Concerns Identified During Advanced Monitoring

3

NSF continues to update its post-award monitoring approach to meet evolving oversight requirements and expectations

Evolution of NSF Post-Award Monitoring Processes

2002 2003 2004 2005 2006 2007 2008 2009

Formalized monitoring program: • Developed basic

Risk Assessment Model – award focused

• Piloted site visit procedures

• Emphasized post-award monitoring

• Increased business assistance to awardees

• Developed post-award monitoring policies and procedures

• Created the Division of Institution and Award Support

• Refined Risk Assessment Model

• Refined Business System Review (BSR) Procedures for large facilities

• Instituted desk review program

• Expanded resources for monitoring by contracting for post-award support

• Revised Risk Assessment Model to an awardee-based approach

• No post-award monitoring findings in financial statement audit report for the first time since 2001

• Covered >90% of the award portfolio through advanced monitoring

• Continued to integrate baseline and advanced monitoring activities

• Incorporated ARRA-related risk factor into risk assessment model

• Enhanced existing monitoring activities to monitor ARRA awards

• Introduced flexible risk category thresholds to risk assessment module

2010 2011

• Increased emphasis on feedback from monitoring staff

• Added risk factors for awards with travel and consultant costs

• Began piloting virtual visit as an alternative to onsite visits

2012

APPENDIX

4

Spurred by increased funding to support research in science, engineering, and education, NSF’s award portfolio has been increasing over the past decade

$27.6 billion in total award funding

43,517 active awards – Standard and continuing grants – Cooperative agreements – Graduate research fellowships – Other awards

2,266 awardees – Universities / 4-year colleges – Non-profit organizations – For-profit organizations – Community colleges – Other awardees

Award portfolio information as of June 30, 2012

63%

33%

1%

<1% 2%

Type of Award Instrument Standard Grants

Continuing Grants

Cooperative Agreements

Other Awards

Fellowships

50% 14%

27%

5% 4%

Type of Awardee Organization Universities / 4-yearCollegesNon-profit Institutions

For-profit Institutions

Community Colleges

Other Awardees

5

NSF developed a risk-based portfolio monitoring strategy that integrates its monitoring activities and focuses limited monitoring resources on awardees administering higher risk awards

NSF’s portfolio monitoring strategy has three key components –

Annual Risk Assessment enables NSF to focus limited advanced monitoring resources on awardees managing higher risk awards

Comprehensive Monitoring Activities augment routine or automated baseline activities with focused advanced monitoring activities to provide broad coverage of the award portfolio. These activities are designed to mitigate the risk of non-compliance with federal grant management regulations (administrative regulations, cost principles, and audit requirements) and NSF award administration requirements

Gathering Feedback and Incorporating Monitoring Results to enable NSF to better target business assistance activities and to make continuous improvements to the risk assessment model and monitoring procedures

National Science Foundation

Category C (Lower Risk)

1,572 awardees (69%)

Category A (Higher Risk)

174 awardees (8%) Risk-based Awardee Ranking

Prioritize monitoring based on: • Higher risk scores • Higher dollars • Number of awards

Risk-Based Award Ranking

43,517 Awards Ranked by risk

points

Category B (Average Risk)

520 awardees (23%)

2,266 Awardees Ranked by risk

points

1

Risk Adjustment Screens 1. Institutional factors 2. Prior monitoring activities and

results 3. Award administration and

program feedback

Risk Adjustment

Criteria

Awardee Risk Categories NSF Grant Portfolio

1 2 3

From Awards To Awardees

Award portfolio information as of June 30, 2012

NSF conducts an annual risk assessment of the awards and awardee institutions within its award portfolio to determine the monitoring priority for each awardee

7

NSF’s comprehensive monitoring strategy enables it to calibrate risk mitigation activities to the risk of awardee non-compliance

Percentage of Portfolio

Advanced Monitoring

Baseline Monitoring

Incr

easi

ngly

focu

sed

and

targ

eted

* Category B selected for advanced monitoring on resource-available basis

Desk Reviews

Automated Report Screening

Grants and Agreements Monitoring

Federal Financial Report (FFR) Transaction Testing

ARRA Recipient Report Reviews

Site Visits BSRs

Category B *

Category A

Category C

8

Baseline monitoring activities combined with day-to-day award administration with automated monitoring provide broad coverage of the entire award portfolio

Baseline Monitoring activities consist of: – Automated financial report screening to identify reporting issues that may need further

scrutiny; these tests relate to cash-on-hand balances, interest income, program income, adjustments to closed awards, grants closeout and financial unobligated balances, and late FFR submissions

– Grants and Agreements Officer award administration to provide insight into actual or potential compliance issues; these activities include changes of principal investigator, award transfers, award supplements, no-cost extensions, special payments, and significant budget realignments

– FFR transaction testing to verify the reasonableness, allocability, and allowability of selected award expenditures

– ARRA quarterly recipient report reviews through a multi-phase review process that augments automated screening of recipient reports with program officer sampling of selected descriptive fields

9

Advanced monitoring focuses on award administration practices of selected awardees more in need of business assistance

Advanced monitoring consists of: – Desk reviews - Assess general management environment, review selected accounting and

financial management policies and procedures and obtain financial information submitted by awardees

– Site visits - Conduct onsite review of selected higher risk award administration areas and follow up on desk review results as needed. In 2012, NSF began to pilot a virtual visit approach as an alternative to on-site visits

– Business System Reviews (BSR) - Combine desk and onsite reviews of large facility business systems to determine whether the operation of those facilities meet NSF’s expectations for business and administrative management

10

NSF’s monitoring activities, combined with other grant-related activities, provide comprehensive coverage of the entire portfolio

Site Visits

BSRs Audit

Resolution Indirect Cost

Rate Negotiation

Business Assistance Outreach

Program Monitoring

Desk Reviews

Automated Report Screening

Grants and Agreements Monitoring

Federal Financial Report (FFR) Transaction Testing

ARRA Recipient Report Reviews

Site Visits BSRs

11

Desk reviews enable NSF to develop reasonable assurance that awardees have the capability to manage NSF-funded grants in compliance with federal regulations Desk reviews enable NSF to gain an understanding of an

institution’s award administration practices and alert NSF to deficiencies. Desk reviews provide a foundation for the site visit’s targeted review activities

NSF completes ~120 desk reviews a year (739 to date)

NSF oversees the desk review process by selecting awardees for desk reviews, authorizing review protocols, approving workpapers and summary reports prepared by a contractor. NSF works with awardees to resolve issues identified during the desk review process

Analysts gather information from public sources, discussion calls, and awardee-provided documentation to assess the awardee’s capacity to manage Federal funds

Core Functional Review Areas General Management Survey

• Grants management roles and responsibilities

• Budgetary revisions and expenditure approvals

• Expenditure monitoring • Cost transfers

Accounting and Financial Management Review

• Accounting policies and procedures documentation

• OMB A-133 audit review • Project accounting • Identification and accounting for

unallowable costs

Federal Financial Report Reconciliation

ARRA Accounting and Reporting Review

Desk reviews provide a cost-effective monitoring alternative to resource-intensive site visits

A follow-up site visit or BSR may be scheduled for an awardee if the desk review demonstrates a need for additional business assistance

12

Site visits provide a detailed review of selected aspects of the institution’s award management practices

Site visits assess the extent to which an awardee’s grant management systems enable efficient and effective performance of NSF awards and ensure compliance with federal regulations

NSF completes ~30 site visits a year (218 to date)

Reviewers assess whether the awardee’s financial management system accurately discloses the financial results of NSF awards and if awardee systems maintain effective control over and accountability for all funds, property, and other assets

Through site visits, NSF extends business assistance by offering award administration best practices and answering questions related to NSF expectations and federal award administration policies

Awardees with significant deficiencies may be scheduled for follow-up site visits

Core Functional Review Areas General Management Survey

Accounting & Financial Management Review

FFR Reconciliation

ARRA Accounting & Reporting Review

Targeted Review Areas Time and Effort

Fringe Benefits

Travel

Consultants

Cost Sharing

Participant Support Costs

Indirect Costs

Procurement

Subawards & Subrecipient Monitoring

Property and Equipment

Program Income

13

In FY 2012, NSF began to pilot virtual visits as an alternative to on-site monitoring visits

NSF selected 4 awardees to pilot virtual visits (University of Hawaii – Hilo, Arctic Research Consortium of the United States, University of Nebraska – Lincoln, North Dakota State University)

“Virtual Sessions” were held using WebEx’s integrated audio, video, chat tools, and desktop sharing capabilities; documents were uploaded by NSF or the awardee on a SharePoint site for review

Virtual site visits will typically occur through a series of 60-120 minute sessions held over the course of a week

Virtual visits are based upon the proven and tested AMBAP site visit approach; four core review areas and selected targeted review areas with the specific questions on review points adapted to the virtual visit approach

14

Virtual visits are based on the proven AMBAP site visit methodology but have some distinct differences

Site Visits Virtual Site Visits In-depth review of award administration

practices in 3 - 4 Core Review Areas and 4 - 6 Targeted Review Areas

In-depth review of award administration practices in 3 - 4 Core Review Areas and 4 - 6 Targeted Review Areas adapted for virtual visit methodology

3 - 4 days of intense meetings Several virtual sessions scheduled over a week

Interact in-person with awardees to gather information about grants management policies and procedures

Use virtual collaboration tools to simulate real-time “face-to-face” interactions with awardees

Limited access to subject matter experts (SMEs) during the visit may require follow-up after the site visit team returns to NSF

Greater flexibility in scheduling individual sessions enables the awardee and CAAR team to consult with experts, research issues, and follow up during a subsequent session

Staff travel is resource intensive and both weather and schedule dependent

Greater flexibility in scheduling

Virtual sessions enable greater participation for staff from multiple sites

Budget and staffing constraints may limit the number of reviews scheduled

Fewer on-site visits reduce travel fatigue and increase staff utilization

Reduced travel costs and staff travel time optimizes limited monitoring resources

15

A lack of documented policies and procedures is a common theme across almost all review areas

A – Accounting and Financial System B – FFR Reconciliation C – Time and Effort Reports for Personnel D – Travel E – Consultants F – Cost Sharing G – Participant Cost Sharing H – Indirect Costs I – Subawards and Subrecipient Monitoring J – Property and Equipment

Concerns Explained

0%10%20%30%40%50%60%70%80%90%

100%

A B C D E F G H I J

FY10 FY11

% o

f rev

iew

s w

ith c

once

rns

# of Documentation Issues # of Times Area Reviewed

16

Site visit reports noted a high frequency of concerns in some of the target review areas

% o

f Rev

iew

s w

ith C

once

rn(s

)

Sub-recipient and Sub-award Monitoring – 59 total concerns – Lack of written policies and procedures (16) – Awardee has not passed through required federal

award administration regulations to its subawardee(s) (9)

– Awardee failed to perform certain procedures before making a substantial subaward to a sub-recipient (8)

– Lack of documentation (7) – Miscellaneous (19)

Participant Support Costs – 36 total concerns – Lack of written policies and procedures (13) – Participant support costs are not tracked in separate

general ledger accounts, sub-accounts, sub-task, or sub-ledgers (5)

– Participant support costs charged to NSF awards included costs related to the awardee’s employees (5)

– Lack of documentation (4) – Miscellaneous (2)

Consultants – 19 total concerns – Lack of written policies and procedures (11) – Lack of documentation (6) – Awardee did not clearly delineate between

consultants, sub-awardees, and vendors (2) Indirect Costs – 10 total concerns

– Lack of written policies and procedures (6) – Awardee failing to follow policies and procedures (1) – Lack of documentation (1) – Awardees do not have a current indirect cost rate

established with NSF or another Federal agency (2)

0%

20%

40%

60%

80%

100%

Sub-awardMonitoring

ParticipantSupportCosts

Consultants IndirectCosts

FY10 FY11

# of concerns # of target area reviews

Concerns Explained

17

Keys to Success for Awardees

Focus on the objectives of the project/program

Understand the requirements and expectations (award letter, award terms and conditions, OMB Circulars)

Develop good accounting practices – accumulation and segregation of costs

Document policies and procedures in writing

Document approvals and conversations between the awardee and NSF

Ask Early and Ask Often!

18

Where can I get information on-line?

Division of Institution & Award Support: http://www.nsf.gov/bfa/dias/index.jsp

Cost Analysis & Audit Resolution Branch: http://www.nsf.gov/bfa/dias/caar/index.jsp

Policy Office: http://www.nsf.gov/bfa/dias/policy/index.jsp

General: http://www.nsf.gov

19

Our Contact Information

Thank You!!

Robyn L. Daniels Cost Analyst for Award Monitoring and Business Assistance Cost Analysis and Audit Resolution Branch

National Science Foundation

(703) 292-4836 rdaniels@nsf.gov